Payrolls rose less than projected in August and the unemployment rate was unexpectedly driven down by Americans leaving the labor force, boosting the odds of additional Federal Reserve easing to spur a faltering recovery.

The economy added 96,000 workers last month following a revised 141,000 increase in July that was smaller than initially estimated, Labor Department figures showed Friday in Washington. Economists had expected a gain of 130,000. Unemployment fell to 8.1 percent, and hourly earnings were unchanged.

Stocks, Treasurys and gold all rose in early trading on bets the figures make it more likely Fed policymakers will expand record monetary stimulus next week after Chairman Ben Bernanke called unemployment a "grave concern." The report also dealt a blow to President Obama one day after he accepted the Democratic Party's nomination for a second term.

"This is definitely a setback for the labor market and the economy," said Michael Feroli, chief U.S. economist at JPMorgan Chase in New York and former economist for the Fed. "This clearly validates Bernanke's concern. We have Europe, the fiscal cliff, and it is a generally cautious business environment."

Employers may be reluctant to expand head counts as they face a global economic slowdown and the so-called fiscal cliff, the $600 billion of tax increases and spending cuts that will take effect automatically at the end of the year unless Congress acts.

Factory employment fell by the most in two years, temporary-help companies eliminated positions for the first time in five months, and the share of the working-age population in the labor force slumped to the lowest since 1981.

Friday's figures come two months before the presidential election. Employment and the economy are central themes in the campaign, with Obama and Republican challenger Mitt Romney each trying to convince voters they can best energize the expansion and create jobs.

Private payrolls

Private payrolls, which exclude government agencies, rose 103,000 after a revised gain of 162,000. They were projected to rise by 142,000, the survey showed.

The jobless rate fell from 8.3 percent as 368,000 Americans left the labor force. Factory payrolls decreased by 15,000, compared with a forecast for a 10,000 increase, after a 23,000 gain in the previous month. Automakers cut 7,500 jobs last month.

The figures reflected the reversal of a July increase that was propelled by fewer shutdowns at automakers for annual retooling related to the new model year. Still, carmakers may continue to add workers. Chrysler, Ford, General Motors, Toyota and Honda reported U.S. auto sales in August that rose more than analysts estimated as new models attracted buyers.

Some companies are looking to pull back. Google said Aug. 13 it will cut about 4,000 positions at its Motorola Mobility Holdings unit, with about one-third of the reductions coming in the U.S. Printer maker Lexmark International announced plans to eliminate 1,700 jobs globally.

Payroll gains slowed from an average 226,000 in the first quarter to 73,000 in the April to June period, before picking up in July. Before Friday's report, data showed it had taken the United States. three years to recover about half, or 4 million, of the 8.8 million jobs lost as a result of the 18-month recession that ended in June 2009.

Unemployment rate

The unemployment rate, derived from a separate Labor Department survey of households, has exceeded 8 percent since February 2009, the longest stretch in monthly records going back to 1948.

Bernanke in an Aug. 31 speech in Jackson Hole, Wyo., cited "the daunting economic challenges" that confront the United States. He also said the Fed will provide additional policy stimulus as needed to promote a stronger economic recovery.

"The stagnation of the labor market in particular is a grave concern," he said. Persistently high unemployment "will wreak structural damage on our economy that could last for many years."

Fed officials at their July 31-Aug. 1 meeting were moving toward additional monetary policy action, according to minutes of the gathering. Many members of the panel said more stimulus will be needed "fairly soon" unless the recovery shows signs of a "substantial and sustainable strengthening."